Key Takeaway
The S&P 500 has had an explosive year - so will it continue? Anything can happen with the market; however, in our opinion, we should expect an upcoming pullback due to elevated company valuations and overbought technical conditions. I believe a probable near-term pullback will ultimately resolve itself in a continuation to the upside, unless something pops up to defuse the show. Will bad news (such as rising unemployment) spark good news for the stock market? It might convince traders that the Fed is closer to lowering rates sooner.
As we continue into the slower summer months, we have our eye on seasonal rotations, which could spark a small pull-back. Historically August and September are challenging months for stocks, and when combined with elevated valuations, it could give pause. On average over the last 20 years, these two months are typically the worst for stocks. However, July is generally a very good month for the market. Although seasonality can serve as a nice barometer, it is not an indicator to make independent decisions from, rather should be used as one of many indicators all working in conjunction to tell a story.
I hope you had an explosive Fourth of July. God bless you, our country and our military!
